This morning, Cisco announced its intention to purchase Sweden-based Tail-f Systems for about $175 million in cash and retention-based incentives. That seems reasonable for a software company that did about $30 million last year and is well aligned with the emerging SDN/NFV markets. Additionally, being headquartered in Sweden means Cisco can pay for this out of its foreign war chest instead of tapping into domestic cash.

While Tail-f does have some enterprise relevance, it’s really more of a service provider product. The company is well known for managing and orchestrating multi-vendor environments and has many service providers as customers, including AT&T and Deutsche Telekcom AG. Having AT&T as a customer is of particular interest given all the news around Domain 2.0 and Cisco being left out of the initial six. Now Cisco has a foot in the door of Domain 2.0.

Service providers are searching for ways to increase profitability. One way of solving this is to simplify operations and replace the legacy, slow, high-touch provisioning model with something that’s real-time, orchestrated and automated. SDN and NFV solve some of the problems, but neither addresses the big issue regarding streamlining operations, and that’s OSS systems.

The problem with OSS systems is that they’ve been patched, amended, and altered over the years. Every time the network operator adds a new device or service, the OSS is modified. Sometimes new OSS systems would be brought in to handle certain vendors or because of mergers and acquisitions. Now most large service providers have overly complex provisioning processes that require lots of touch points and take months to complete because of the mess that is the current state of OSS systems. Hardly the on-demand environment service providers are looking for.

Tail-f solves this problem through a network service orchestration solution. The product provides a single pane of glass for infrastructure from layer 2 through layer 7 and includes hardware devices, virtual appliances, and OpenFlow switches. The solution can actually help bridge the gap between today’s environments and SDN/NFV by making the provisioning across both environments easier.

Another interesting point regarding Tail-f is its multi-vendor capabilities. The company models native commands in Yang, enabling the products to interoperate with a number of Cisco competitors such as F5, Juniper, Riverbed, A10 and Alcatel-Lucent. Multi-vendor management isn’t something Cisco is known for, but Tail-f can give Cisco greater control over the network no matter who the network vendors are. In a conversation with Cisco this morning, the company stated it fully intends to maintain the multi-vendor nature of the product. This is the right decision for Cisco as it gives the company control over the network regardless of the underlying hardware. Additionally, I believe Tail-f can help Cisco reduce the overall TCO of an all-Cisco environment while being able to maintain price points and current margin structure.

Long term I believe automation and orchestration and the ability to simplify operational processes will be a key point of differentiation for network solution providers. Tail-f gives Cisco a great set of tools to help service providers drive down the cost of running a network while enabling better service elasticity.